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The "Only Go-to Safe Haven From Global Turmoil" |
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U.S. Treasurys are no longer the safe haven they once were… The only go-to safe haven from global turmoil… Robert Kiyosaki has always said: "Don't listen to what the rich say. Watch what they do." That's exactly what his "Financial 007" does every single day. He built a system — the T.R.A.C.K. system — that tracks where CEOs and corporate insiders are putting their own personal money. Not their words. Their money. And right now, that system is pointing to one stock. He's giving away the ticker for free. Click here to follow the money.
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Dear reader, |
Something is… off with the bond market. I refer specifically to the United States Treasurys market. |
United States Treasurys have long been considered among the safest of "safe assets." |
On occasions of geopolitical anxiety — for example — investors flee the uncertain stock market for the iron security of Treasury bonds. |
We are presently mired in geopolitical anxiety. |
The United States, Israel, Iran and several Gulf states batten upon each other with bombs, missiles and drones. |
Iran has bottled off the world's most critical oil transit point, the Strait of Hormuz. |
The closure is already playing the devil with global energy markets… and when it ends is a mystery. |
Thus investors should be flocking headlong into the safety of United States Treasurys. |
Yet they are not. |
How Bonds Work |
Before proceeding, let us review, briefly, bond dynamics. Bond prices and bond yields exist in a state of antagonistic polarity. |
If bond prices increase, bond yields decrease. If bond prices decrease, bond yields increase. |
Imagine the poles of a seesaw swinging in opposing dynamism. Now you understand the price/yield relation. |
Meantime, bond prices increase in periods of surging investor demand — as is the general case with geopolitical upheaval. |
And so, following our theoretical see-saw, bond yields decrease as bond prices increase. |
Yet despite all hell's angels… Treasury bond prices are not increasing. They are decreasing. Thus bond yields are increasing. |
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Market Watch columnist, Mr. Mark Hulbert: |
Treasury bonds used to be places for investors to weather geopolitical upheaval. Whenever investors shifted to "risk off" from "risk on," out went stocks and other risky assets in favor of what was perceived as the world's safest asset: U.S. government bonds. |
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Recently, the opposite has been the case — more so after U.S. and Israeli forces attacked Iran on Feb. 28… |
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On March 2, Middle East hostilities were escalating, more countries became involved and President Donald Trump announced that an extended U.S. campaign against Iran is possible. |
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Treasury yields rose in response — just the opposite of how a safe-haven asset should behave. When bond yields rise, prices fall. |
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It All Started With the Great Financial Crisis |
When did investors begin seeking havens safer than United States Treasurys? |
The answer, evidently, is during the great rattles of 2008-2009: |
A recent study found that U.S. Treasurys have been losing their safe-haven status for years. Entitled "Convenience Lost," the study focused on Treasurys' so-called convenience yield, which refers to their yield advantage relative to the presumed risk-free rate. |
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That advantage existed because investors were willing to forego some interest income in return for the greater safety that U.S. Treasurys (allegedly) provided. This yield advantage began to shrink around the time of the 2008-09 global financial crisis. |
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For the past several years, this presumed advantage has actually been negative. Investors are no longer willing to accept a lower yield for Treasury bond protection. Instead, they insist on a higher yield from other developed economies' government bonds. |
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Thus investors have inverted the bird in the hand being worth two in the bush formula. |
They seek the two birds in the bush over the one in the hand. |
It Comes Down to Debt |
Yet why has the formula inverted? Why have safety-seeking investors pursued havens other than United States Treasurys? |
Mr. Hulbert: |
The researchers argued that the single biggest reason is that the U.S. government's debt has been growing faster than its GDP. Before the financial crisis, the government's debt-to-GDP ratio stood around 60%; today it is above 120%. |
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I find justice here. In these pages I have often moaned about today's perilous debt-to-GDP ratio. |
In brief reminder, any ratio exceeding 90% represents an economic burden. And as this fellow notes, the debt-to-GDP ratio of the United States exceeds 120%. |
Who can blame investors for shunning its bonds? |
"The investment implication," concludes Mr. Hulbert, "is that we need to look elsewhere than the U.S. Treasury market for a haven during times of geopolitical uncertainty." |
The Golden Anchor |
Where — then — should safe haven-seekers look? |
Do not look to Bitcoin. Look instead to gold: |
"[Gold] is the only go-to safe haven from global turmoil." |
I am compelled to agree. |
What asset other than gold has maintained its value for thousands of years? |
If any exists, I am certain one "asset" is not among them. |
That asset is United States Treasury bonds. It is the debt instrument of a debt-sunk nation. |
During the 1870s the German government refused American bonds — "even if signed by an angel in heaven," as one fellow styled it. |
On some tomorrow… perhaps not terribly distant… |
Much of the world will refuse American bonds — even if signed by an angel in heaven. |
Brian Maher |
for Freedom Financial News |
P.S. If you've ever had the feeling that Wall Street insiders are playing a different game than you… you're right. They are. But what if you could see their playbook? Robert Kiyosaki has found a man — a former intelligence professional — who built a system that tracks exactly where CEOs and billionaires are putting their own money. It's called the T.R.A.C.K. system. And right now, he's revealing his #1 stock pick for free. Click here to see the stock insiders are quietly buying. |
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